LABOR RELATION AND NEGOTIATIONS

Fundamental Principle and Policies in Labor Laws

A. CONSTITUTIONAL PROVISIONS

A.1 ARTICLE II. SECS 9,10,11,13,14,18,20

Section 14. The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.

Section 18. The State affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare.

Section 20. The State recognizes the indispensable role of the private sector, encourages
private enterprise, and provides incentives to needed investments.

Section 9. The State shall promote a just and dynamic social order that will ensure the
prosperity and independence of the nation and free the people from poverty through policies
that provide adequate social services, promote full employment, a rising standard of living, and
an improved quality of life for all.

Section 10. The State shall promote social justice in all phases of national development.

General Definition of Social Justice

Social justice is neither communism, nor despotism, nor atomism, nor anarchy, but the
humanization of laws and the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at least be approximated. [Calalang
vs. Williams, G.R. No. 47800 (1940)]

Welfare State

The welfare state concept is found in the constitutional clause on the promotion of social justice
to ensure the well-being and economic security of all the people, and in the pledge of protection
to labor with specific authority to regulate the relations between landowners and tenants and
between labor and capital. [Alalayan vs. National Power Corporation, G.R. No. L-24396 (1968)]

Limits of Social Justice

Social justice should be used only to correct an injustice. It must be founded on the recognition
of the necessity of interdependence among diverse units of a society, and of the protection that
should be equally and evenly extended to all groups as a combined force in our social and
economic life. As partners in nation-building, labor and management need each other to foster
productivity and economic growth; hence, the need to weigh and balance the rights and welfare
of both the employee and employer. [Agabon vs. NLRC, G.R. No. 158693 (2004)]

The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not
condone the offense. Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved privilege. Social justice cannot
be permitted to be a refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their hands are clean
and their motives blameless and not simply because they happen to be poor. This great policy
of our Constitution is not meant for the protection of those who have proved they are not worthy
of it, like the workers who have tainted the cause of labor with the blemishes of their own
character. [Tirazona vs. Philippine EDS Techno-Service Inc., G.R. No. 169712 (2009)]
Section 11. The State values the dignity of every human person and guarantees full respect for
human rights.

Section 13. The State recognizes the vital role of the youth in nation-building and shall promote
and protect their physical, moral, spiritual, intellectual, and social well-being. It

Laissez Faire

The Constitution is primarily a document of social justice, and although it has recognized the
importance of the private sector, it has not embraced fully the concept of laissez- faire or relied
on pure market forces to govern the economy. [Employees Confederation of the Philippines vs.
NWPC, G.R. No. 96169 (1991)]

Balancing of Interests

It is high time that employer and employee cease to view each other as adversaries and instead
recognize that theirs is a symbiotic relationship, wherein they must rely on each other to ensure
the success of the business. When they consider only their own self- interests, and when they
act only with their own benefit in mind, both parties suffer from short-sightedness, failing to
realize that they both have a stake in the business. The employer wants the business to
succeed, considering the investment that has been made. The employee in turn, also wants the
business to succeed, as continued employment means a living, and the chance to better one’s
lot in life. It is clear then that they both have the same goal, even if the benefit that results may
be greater for one party than the other. If this becomes a source of conflict, there are various,
more amicable means of settling disputes and of balancing interests that do not add fuel to the
fire, and instead open avenues for understanding and cooperation between the employer and
the employee. [Toyota Motor Phils. Corp Workers Association (TMPCWA) v. NLRC, G.R. No.
158786 (2007)]

While labor laws should be construed liberally in favor of labor, we must be able to balance this
with the equally important right of the [employer] to due process [Gagui v. Dejero, G.R. No.
196036 (2013)

A.2 Article III, Secs 1, 4, 7, 8, 10, 16, 18(2)

Due Process

Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee
by his employer are two-fold: the substantive and the procedural. Not only must the dismissal be
for a valid or authorized cause as provided by law, but the rudimentary requirements of due
process, basic to which are that an opportunity to be heard and to defend oneself must be
observed before an employee may be dismissed [Metro Eye Security v. Salsona, G.R. No.
167367 (2007)]

To constitute valid dismissal from employment, two requisites must concur: (1) the dismissal
must be for a just or authorized cause; and (2) the employee must be afforded an opportunity to
be heard and to defend himself. [Jeffrey Nacague vs. Sulpicio Lines, Inc., G.R. No. 172589
(2010)]

Labor as Property Right

One’s employment is a property right, and the wrongful interference therewith is an actionable
wrong. The right is considered to be property within the protection of the constitutional
guarantee of due process of law. [Texon Manufacturing v. Millena, G.R. No. 141380 (2004)]

The Right to Assemble

The right of peaceable assembly is a right cognate to those of free speech and free press and is
equally fundamental. [de Jonge vs. Oregon (1937)]

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor
shall any person be denied the equal protection of the laws.

Section 4. No law shall be passed abridging the freedom of speech, of expression, or of the
press, or the right of the people peaceably to assemble and petition the government for redress
of grievances.

Wearing armbands and putting up placards to express one’s views without violating the rights of
third parties, are legal per se and even constitutionally protected. [Bascon v CA, G.R. No.
144899 (2004)]

Section 7. The right of the people to information on matters of public concern shall be
recognized. Access to official records, and to documents and papers pertaining to official acts,
transactions, or decisions, as well as to government research data used as basis for policy
development, shall be afforded the citizen, subject to such limitations as may be provided by
law.

Section 8. The right of the people, including those employed in the public and private sectors, to
form unions, associations, or societies for purposes not contrary to law shall not be abridged.

Section 16. All persons shall have the right to a speedy disposition of their cases before all
judicial, quasi-judicial, or administrative bodies.

Section 18 (2). No involuntary servitude in any form shall exist except as a punishment for a
crime whereof the party shall have been duly convicted.

A.3 Article XIII, Secs 1, 2, 3, 13, 14

Section 1. The Congress shall give highest priority to the enactment of measures that protect
and enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for
the common good.

To this end, the State shall regulate the acquisition, ownership, use, and disposition of property
and its increments.

Section 2. The promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.

Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with
law. They shall be entitled to security of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers
and the preferential use of voluntary modes in settling disputes,

The Right to Form Associations

The right to form associations shall not be impaired except through a valid exercise of police
power. [Bernas, The 1987 Philippine Constitution: a Comprehensive Reviewer]

Section 10. No law impairing the obligation of contracts shall be passed.

Non-impairment of Contracts

A law which changes the terms of a legal contract between parties, either in the time or mode or
performance, or imposes new conditions, or dispenses with those expressed, or authorizes for
its satisfaction something different from that provided in its terms, is a law which impairs the
obligation of a contract and is null and void. [Clemens vs. Nolting (1922)]

demands that one party to the contract shall be protected against himself. [Leyte Land
Transportation Co. vs. Leyte Farmers & Workers Union, G.R. No. L-1377 (1948)]

Vis-à-vis the freedom of contract

The prohibition to impair the obligation of contracts is not absolute and unqualified. In spite of
the constitutional prohibition and the fact that both parties are of full age and competent to
contract, it does not necessarily deprive the State of the power to interfere where the parties do
not stand upon an equality, or where the public health including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of
labor to its just share in the fruits of production and the right of enterprises to reasonable returns
to investments, and to expansion and growth.

Participation in Decision-Making Process

Verily, a line must be drawn between management prerogatives regarding business operations
per se and those which affect the rights of the employees. In treating the latter, management
should see to it that its employees are at least properly informed of its decisions or modes
action. Indeed, industrial peace cannot be achieved if the employees are denied their just
participation in the discussion of matters affecting their rights. [Phil. Airlines Inc. vs. NLRC, G.R.
No. 85985 (1993)]

Management and the Constitution: Management Function/Prerogative

The law in protecting the rights of the employees authorizes neither oppression nor self-
destruction of the employer. It should be made clear that when the law tilts the scale of justice in
favor of labor, it is but a recognition of the inherent economic inequality between labor and
management. Never should the scale be so tilted if the result is an injustice to the employer.
[Panuncillo v CAP, G.R. No. 161305 (2007)]

This Court held that the employer’s right to conduct the affairs of his business according to its
own discretion and judgment, is well- recognized. An employer has a free reign and enjoys wide
latitude of discretion to regulate all aspects of employment. This is a management prerogative,
where the free will of management to conduct its own affairs to achieve its purpose takes form.
[Torreda vs. Toshiba, G.R. No. 165960 (2007)]

Under the doctrine of management prerogative, every employer has the inherent right to
regulate, according to his own

discretion and judgment, all aspects of employment, including hiring, work assignments, working
methods, the time, place and manner of work, work supervision, transfer of employees, lay-off
of workers, and discipline, dismissal, and recall of employees. The only limitations to the
exercise of this prerogative are those imposed by labor laws and the principles of equity and
substantial justice. [Peckson v Robinson’s Supermarket Corporation, G.R. No. 198534, (2013)]

The exercise of management prerogative is valid provided it is not performed in a malicious,

harsh, oppressive, vindictive or wanton manner or out of malice or spite. [Magdadaro v. PNB,
G.R. No. 166198 (2009)]

Limits to Management Prerogative

(1) Good faith - So long as a company’s management prerogatives are exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this
Court will uphold them...Even as the law is solicitous of the welfare of the employees, it must
also protect the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose cannot be
denied. [Ernesto G. Ymbong vs. ABS-CBN Broadcasting Corp., G.R. No. 184885 (2012)]

(2) Without grave abuse of discretion - But, like other rights, there are limits thereto. The
managerial prerogative to transfer personnel must be exercised without grave abuse of
discretion, bearing in mind the basic elements of justice and fair play. Having the right should
not be confused with the manner in which the right is exercised. [Tinio vs. CA, G.R. No. 171764
(2007)]

(3) Law – In one case, a pharmaceutical company defended its termination of rank and file
employees during a bargaining deadlock, as an exercise of management prerogative. This was
after the Labor Secretary had assumed jurisdiction over the dispute and enjoined the parties
from “any acts which might exacerbate the situation.”

The Court disagreed with the company’s defense, stating that the privilege is not absolute but
subject to limitations imposed by law. In this case, it is limited by Sec. 236(g), which gives the
Secretary the power to assume jurisdiction and resolve labor disputes involving industries
indispensable to national interest.

The company’s management prerogatives are not being unjustly curtailed but duly tempered by
the limitations set by law, taking into account its special character and the particular
circumstances in the case at bench. [Metrolab Industries, Inc. v. Roldan-Confesor, G.R. No.
108855 (2013)]

(4) Collective Bargaining – The CBA provisions agreed upon by the Company and the Union
delimit the free exercise of management prerogative. The parties in a CBA may establish such
stipulations, clauses, terms and conditions as they may deem convenient provided these are not
contrary to law, morals, good customs, public order or public policy. Where the CBA is clear and
unambiguous, it becomes the law between the parties and compliance therewith is mandated by
the express policy of the law. [Goya v. Goya, Inc., Employees Union-FFW, G.R. No. 170054
(2013)]

(5) Equity and/or Substantial Justice – The Court recognized the inherent right of the employer
to discipline its employees but it should still ensure that the employer exercises the prerogative
to discipline humanely and considerately, and that the sanction imposed is commensurate to the
offense involved and to the degree of the infraction. The discipline exacted by the employer
should further consider the employee’s length of service and the number of infractions during
his employment. [Dongon v. Rapid Movers and Forwarders Co., Inc., G.R. No. 163431 (2013)]

Assumption of jurisdiction by the Secretary of Labor

This Court declared that it recognizes the exercise of management prerogatives and it often
declines to interfere with the legitimate business decisions of the employer... However, as
expressed in PAL vs. NLRC, the privilege is not absolute, but subject to exceptions. One of
these exceptions is when the Secretary of Labor assumes jurisdiction over labor disputes
involving industries indispensable to the national interest under Article 263(g) of the Labor
Code. [University of Immaculate Concepcion Inc. vs. Sec. of Labor, G.R. No. 151379 (2005)]

Section 13. The State recognizes the vital role of the youth in nation-building and shall promote
and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in
the youth patriotism and nationalism, and encourage their involvement in public and civic affairs.

Section 14. The State shall protect working women by providing safe and healthful working
conditions, taking into account their maternal functions, and such facilities and opportunities that
will enhance their welfare and enable them to realize their full potential in the service of the
nation.

B. Civil Code Provisions relating to Labor B.1 Article 19

Article 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.

B.2 Article 1700

Article 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore,
such contracts are subject to the special laws on labor unions, collective bargaining, strikes and
lockouts, closed shop, wages, working conditions, hours of labor and similar subjects.

B.3. Article 1702

Article 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.

Contracts

Under the Civil Code, contracts of labor are explicitly subject to the police power of the state
because they are not ordinary contracts but are impressed with public interest. Inasmuch as in
this particular instance the contract in question would have been deemed in violation of
pertinent labor laws, the provisions of said laws would prevail over the terms of the contract, and
private respondent would still be entitled to overtime pay. [PAL Employees Savings and Loan
Assn., Inc. vs. NLRC, G.R. No. 105963 (1996)]

Indeed, a contract of employment is impressed with public interest. For this reason, provisions
of applicable statutes are deemed written into the contract. Hence, the parties are not at liberty
to insulate themselves and their relationships from the impact of labor laws and regulations by
simply contracting with each other. Moreover, in case of doubt, the terms of a contract should
be construed in favor of labor. [Innodata Philippines, Inc. vs. Quejada-Lopez, G.R. No. 162839
(2006)]

Liberal Construction

Of the laws

Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of
the provisions thereof shall be resolved in favor of labor. Consistent with the State’s avowed
policy to afford protection to labor, as Article 3 of the Labor Code and Section 3, Article XIII of
the 1987 Constitution have enunciated, particularly in relation to the worker’s security of tenure,
the Court held that “[t]o be lawful, the cause for termination must be a serious and grave
malfeasance to justify the deprivation of a means of livelihood. This is merely in keeping with the
spirit of our Constitution and laws which lean over backwards in favor of the working class, and
mandate that every doubt must be resolved in their favor.” Moreover, the penalty imposed on
the erring employee ought to be proportionate to the offense, taking into account its nature and
surrounding circumstances. [Hocheng

Philippines Corporation v. Farrales, G.R. No. 211497 (2015)]

Of labor contracts

While the terms and conditions of a CBA constitute the law between the parties, it is not
however, an ordinary contract to which is applied the principles of law governing ordinary
contracts. A CBA, as a labor contract within the contemplation of Article 1700 of the Civil Code
of the Philippines which governs the relations between labor and capital, is not merely
contractual in nature but impressed with public interest, thus, it must yield to the common good.
As such, it must be construed liberally rather than narrowly and technically, and the courts must
place a practical and realistic construction upon it, giving due consideration to the context in
which it is negotiated and purpose which it is intended to serve. [Cirtek Employees Labor Union-
FFW v Cirtek Electronics, G.R. No. 190515 (2010)]

In general

When there is doubt between the evidence submitted by the employer and that submitted by the
employee, the scales of justice must be tilted in favor of the employee. This is consistent with
the rule that an employer’s cause could only succeed on the strength of its own evidence and
not on the weakness of the employee’s evidence. [Misamis Oriental II Electric Service
Cooperative vs. Virgilio Cagalawan, G.R. No. 175170 (2012)]

Fair treatment

The right of an employer to dismiss an employee differs from and should not be confused with
the manner in which such right is exercised. It must not be oppressive and abusive since it
affects one's person and property. [FASAP v. PAL, G.R. No. 178083 (2008)]

Mutual obligation

The employer's obligation to give his workers just compensation and treatment carries with it the
corollary right to expect from the workers adequate work, diligence and good conduct. [Judy
Philippines, Inc. v NLRC, G.R. No. 111934, (1998)]

Compliance with law

It is also important to emphasize that the return-to-work order not so much confers a right as it
imposes a duty; and while as a right it may be waived, it must be discharged as a duty even
against the worker's will. [Sarmiento v. Tuico, G.R. No. 75271 (1988)]

Employee's compliance and obedience to employer's orders

The lack of a written or formal designation should not be an excuse to disclaim any
responsibility for any damage suffered by the employer due to his negligence. The measure of
the responsibility of an employee is that if he performed his assigned task efficiently and
according to the usual standards, then he may not be held personally liable for any damage
arising therefrom. Failing in this, the employee must suffer the consequences of his negligence
if not lack of due care in the performance of his duties. [PCIB v. Jacinto, G.R. No. 92742 (1991)]